Beginner sportstraders are frequently burdened with the baggage of unrealistic expectation.
It is understandable how these unfeasible expectations can be formed in the psyche of the novice trader. He may have seen websites that promise enormous returns; adverts that extol some trading programme which claims to have a success rate of 97% on all trades. He may have read an article about some trader who pulls in $10,000 a week by working one hour per day from his palatial shoreline home.
Being exposed to nonsense such as this, it is easy for the beginner trader not only to believe the hype is possible, but to actually expect that unrealistic level of success.
The beginner trader has become a victim of sales gimmickry, and embarks on chasing the dream without pausing to realise that the adverts and websites are simply engaging in promotional pimping to ultimately sell something. The "services" these adverts promote will only emphasize the "possibilities", and will always ignore the realities.
If trading was as easy as they purport it to be, everyone would be doing it.
If the beginner trader saw an advert "You too can become a neuro-surgeon with our easy 2-hour-learn-at -home-CD and immediately earn $10,000 per week" he would imediately dismiss it as preposterous. Conversely, a similar advert where trading is concerned promising a similar monetary return can persuade him that such is possible.
Unfortunately, sales pitches like those outlined above can cause monetary and psychological difficulties to the beginner trader. The unrealistic expectations engendered by such material will lead ultimately to disappointment and rash trading actions. I firmly believe that trading with unrealistic expectations is a guaranteed way to lose your entire trading bank.
Monday, September 13, 2010
Saturday, August 21, 2010
The Fear Of Losing
The Fear Of Losing has an evil twin brother at the other end of the spectrum -- Unrealistic Expectations.
Recognising, understanding and dealing with these two siblings is the first essential step to a succesful trading career.
The Fear Of Losing is a natural fail-safe characteristic in us all. Without it in everyday life we would be rash and hasty in our decision making. The Fear Of Losing makes us more prudent which can only be a good thing.
Unfortunately, in trading, fear of losing can suffocate initiative. It stifles impetus and enterprise; it can be a motivation killer. You become paralyzed by the fear of losing to the extent that you become afraid to execute any trade.
At the outset, the beginner trader needs to realize one essential truth in order to overcome his psychological fear of losing. And the truth is that IT IS NOT ABOUT THE MONEY. At least not at the beginning. Money will be the benchmark of a trader's success at the end of each month, but the focussing on win or lose on each trade is defeating. At the beginning, the novice should concentrate on the methodology that he learned and practiced during paper trading. Trading is a process, an implementation of proven methodologies and strategies and timing. If these are in place and being used correctly, the money will follow.
Tomorrow, perhaps we can take a look at Unrealistic Expectations.
Recognising, understanding and dealing with these two siblings is the first essential step to a succesful trading career.
The Fear Of Losing is a natural fail-safe characteristic in us all. Without it in everyday life we would be rash and hasty in our decision making. The Fear Of Losing makes us more prudent which can only be a good thing.
Unfortunately, in trading, fear of losing can suffocate initiative. It stifles impetus and enterprise; it can be a motivation killer. You become paralyzed by the fear of losing to the extent that you become afraid to execute any trade.
At the outset, the beginner trader needs to realize one essential truth in order to overcome his psychological fear of losing. And the truth is that IT IS NOT ABOUT THE MONEY. At least not at the beginning. Money will be the benchmark of a trader's success at the end of each month, but the focussing on win or lose on each trade is defeating. At the beginning, the novice should concentrate on the methodology that he learned and practiced during paper trading. Trading is a process, an implementation of proven methodologies and strategies and timing. If these are in place and being used correctly, the money will follow.
Tomorrow, perhaps we can take a look at Unrealistic Expectations.
Sunday, August 15, 2010
Psychology and Trading
Along with a trading plan, every successful trader also has -- consciously or sub-consciously -- a trading psychology plan. Making the transition from paper trading to real money trading is as much about a psychological capacity as about a familiarity with the mechanisms of trading.
The greatest psychological hurdle to cross is undoubtedly the Fear Of Losing. Fear of losing is the elephant-in-the-room -- the great destroyer of many a trader's dream of "making it".
Fear of losing -- not to be confused with a sensible caution and respect for risk -- inculculates in the beginner trader a fear of taking on potential trades in a market.
He becomes overly selective, entering only those trades which he believes offer the highest potential for profit taking. At the start of his trading day he lets two or trades go by without playing; he suspects they might be "bad trades". During his paper trading initiation he would have unhesitatingly entered these trades. Invariably these couple of opening trades win.
He is now a little bit nervous and disappointed at losing out on some decent profit, and jumps into the next trade. You've guessed it; this trade goes against him, and he loses. So does the next, not because the market went against him in a significant way but that he got out unnescessarily early. Fear of losing has caused this avoidable loss. Erosion of confidence is the consequence of a fear of losing.
Our beginner trader has lost sight of the fact that some trades WILL lose. It is a fact of trading life that even the most experienced and successful sportstraders on the betting exchanges and on Wall Street cannot and will not ever achieve a 100% success rate. Our beginner trader is psychologically wired into a mind-set that allows him engage only in those particular trades that he believes will move in a particular direction. On my website, and it is worth repeating here, I emphasize that it doesn't matter which direction a market is moving -- as long as it is moving, and that you are on the right side of that momentum. The only market that you don't want to waste your time and effort with is a market that is flat and static. Our beginner trader doen't see this anymore; he only "plays" those markets in which he thinks offer an overwhelming chance of profit taking.
The beginner real money trader has abandoned the methods and approach which he developed during his paper trading period, and succumbed to the fear of losing. He now begins to question his paper trading records and doubt his strategy. Nothing wrong with his strategy whilst paper trading, simply that his psychological attitude has changed. If his paper trading profits were proven and valid, then the same should apply to real money trading. Only the fear of losing has conspired against him realizing a successful transition.
The greatest psychological hurdle to cross is undoubtedly the Fear Of Losing. Fear of losing is the elephant-in-the-room -- the great destroyer of many a trader's dream of "making it".
Fear of losing -- not to be confused with a sensible caution and respect for risk -- inculculates in the beginner trader a fear of taking on potential trades in a market.
He becomes overly selective, entering only those trades which he believes offer the highest potential for profit taking. At the start of his trading day he lets two or trades go by without playing; he suspects they might be "bad trades". During his paper trading initiation he would have unhesitatingly entered these trades. Invariably these couple of opening trades win.
He is now a little bit nervous and disappointed at losing out on some decent profit, and jumps into the next trade. You've guessed it; this trade goes against him, and he loses. So does the next, not because the market went against him in a significant way but that he got out unnescessarily early. Fear of losing has caused this avoidable loss. Erosion of confidence is the consequence of a fear of losing.
Our beginner trader has lost sight of the fact that some trades WILL lose. It is a fact of trading life that even the most experienced and successful sportstraders on the betting exchanges and on Wall Street cannot and will not ever achieve a 100% success rate. Our beginner trader is psychologically wired into a mind-set that allows him engage only in those particular trades that he believes will move in a particular direction. On my website, and it is worth repeating here, I emphasize that it doesn't matter which direction a market is moving -- as long as it is moving, and that you are on the right side of that momentum. The only market that you don't want to waste your time and effort with is a market that is flat and static. Our beginner trader doen't see this anymore; he only "plays" those markets in which he thinks offer an overwhelming chance of profit taking.
The beginner real money trader has abandoned the methods and approach which he developed during his paper trading period, and succumbed to the fear of losing. He now begins to question his paper trading records and doubt his strategy. Nothing wrong with his strategy whilst paper trading, simply that his psychological attitude has changed. If his paper trading profits were proven and valid, then the same should apply to real money trading. Only the fear of losing has conspired against him realizing a successful transition.
Thursday, August 12, 2010
From Paper Trading To Real Trading
The tyro trader now decides to make the jump from paper trading to trading with real money.
He has looked at the different sports markets available, has identified those in which he is most confident and comfortable with. His paper trading practice dry runs have revealed a few strategies that show promise -- a decent profit overall with around 80% of his trades coming out on "the right side." Now it is time to reap the rewards with some real money trades.
However, the first few trades show a loss. The trader feels the first very slight sense of self-doubt. Why did a strategy that worked so well in simulation not work with real money?
Losses continue into the following day. And the losses get bigger with each trade. Emotion and Fear have now entered the equation. The trader begins to skip some trades which he would have unhesitatingly entered when paper trading. These trades would actually have shown a profit if he had traded them. Worse, the trades he does enter into just throw up more and more losses.
Despairingly, the trader begins to question his entire methodology. Maybe, he wonders, was his paper trading testing completely in error; did he incorrectly interpret the results?
After a week of mounting losses the trader decides to conclude his real money trading and return to further paper trading testing.
Is this just a scenario?
No, it happens every day to somebody, somewhere.
And there is a single indentifiable cause for this calamitous turn of events.................. although the trader has learnt the structures and methodologies of trading whilst paper trading, he has not learned the psychology of trading.
Tomorrow -- a review of the psychology of trading.
He has looked at the different sports markets available, has identified those in which he is most confident and comfortable with. His paper trading practice dry runs have revealed a few strategies that show promise -- a decent profit overall with around 80% of his trades coming out on "the right side." Now it is time to reap the rewards with some real money trades.
However, the first few trades show a loss. The trader feels the first very slight sense of self-doubt. Why did a strategy that worked so well in simulation not work with real money?
Losses continue into the following day. And the losses get bigger with each trade. Emotion and Fear have now entered the equation. The trader begins to skip some trades which he would have unhesitatingly entered when paper trading. These trades would actually have shown a profit if he had traded them. Worse, the trades he does enter into just throw up more and more losses.
Despairingly, the trader begins to question his entire methodology. Maybe, he wonders, was his paper trading testing completely in error; did he incorrectly interpret the results?
After a week of mounting losses the trader decides to conclude his real money trading and return to further paper trading testing.
Is this just a scenario?
No, it happens every day to somebody, somewhere.
And there is a single indentifiable cause for this calamitous turn of events.................. although the trader has learnt the structures and methodologies of trading whilst paper trading, he has not learned the psychology of trading.
Tomorrow -- a review of the psychology of trading.
Monday, August 9, 2010
BECOMING A TRADER
The first installment of a series of related articles.
The first nervous steps.
You've read a few tutorials, looked up some websites, and you would like to try your hand at this trading game.
For a few years you have made regular bets on your particular sport of interest -- horseracing, football, etc. On the rare occasion you may have made a Lay bet. Now you would like to execute a few "trades" on sports about which you consider you have a certain level of knowledge.
Immediately two options present themselves.
Do you "paper trade" or jump straight in with "real money" -- albeit in very small amounts to begin with.
Experts and commentators in the trading field are equally divided as to the merits of paper trading. No doubt trading with virtual money in a simulation mode does serve as a good learning process with no risk whatsoever to your capital. You cannot lose money. With paper trading you have a risk-free environment to put into practice what you have learnt, to test your ability, to try out different strategies.
On the other hand, the risk-free element of paper trading can mask the realities of trading in a real money situation.
If I gave you £1,000 to trade, would your trading behaviour be the same as if your were trading -- and risking -- your OWN money? Would you be more flippant and adventurous if your own money was not at risk. In real money trading you will most likely incorporate a stop-loss mechanism in your strategy whereby you will get out of a trade if it goes against you. Paper trading, conversely, will usually see you "hang in there" until the price recovers and comes back to your position for a profit. Emotion and fear are absent in paper trading -- in real money trading they are always present.
And finally, does one really learn from one's mistakes in paper trading. Or if we do, is it quite possible that we learn MORE from our mistakes when trading with real money? Human nature being what it is, we learn more from mistakes that hurt us financially than those mistakes which cost us nothing at all.
There is a middle way, and it is a route I would recommend. Begin your trading adventure with minimum stakes in a real trading environment -- £2 each trade with a stop loss of 5% giving you a typical up-and-down spread of two ticks. A losing trade will cost you ten pence at the most.
If you are running a 32-bit computer (doesn't work on 64-bit machines) and If you would like to try simulated no-risk-to-capital trading, there is an excellent real-time Betfair simulation platform from "Betfair And Square" available for Free download HERE.
Tomorrow .............. making the jump from paper trading to real trading.
The first nervous steps.
You've read a few tutorials, looked up some websites, and you would like to try your hand at this trading game.
For a few years you have made regular bets on your particular sport of interest -- horseracing, football, etc. On the rare occasion you may have made a Lay bet. Now you would like to execute a few "trades" on sports about which you consider you have a certain level of knowledge.
Immediately two options present themselves.
Do you "paper trade" or jump straight in with "real money" -- albeit in very small amounts to begin with.
Experts and commentators in the trading field are equally divided as to the merits of paper trading. No doubt trading with virtual money in a simulation mode does serve as a good learning process with no risk whatsoever to your capital. You cannot lose money. With paper trading you have a risk-free environment to put into practice what you have learnt, to test your ability, to try out different strategies.
On the other hand, the risk-free element of paper trading can mask the realities of trading in a real money situation.
If I gave you £1,000 to trade, would your trading behaviour be the same as if your were trading -- and risking -- your OWN money? Would you be more flippant and adventurous if your own money was not at risk. In real money trading you will most likely incorporate a stop-loss mechanism in your strategy whereby you will get out of a trade if it goes against you. Paper trading, conversely, will usually see you "hang in there" until the price recovers and comes back to your position for a profit. Emotion and fear are absent in paper trading -- in real money trading they are always present.
And finally, does one really learn from one's mistakes in paper trading. Or if we do, is it quite possible that we learn MORE from our mistakes when trading with real money? Human nature being what it is, we learn more from mistakes that hurt us financially than those mistakes which cost us nothing at all.
There is a middle way, and it is a route I would recommend. Begin your trading adventure with minimum stakes in a real trading environment -- £2 each trade with a stop loss of 5% giving you a typical up-and-down spread of two ticks. A losing trade will cost you ten pence at the most.
If you are running a 32-bit computer (doesn't work on 64-bit machines) and If you would like to try simulated no-risk-to-capital trading, there is an excellent real-time Betfair simulation platform from "Betfair And Square" available for Free download HERE.
Tomorrow .............. making the jump from paper trading to real trading.
Saturday, August 7, 2010
I've Fallen In Love ...........
Totally, head-over-heels fallen in love with a particular bookmaker ..............Bet365.
In these times of regular punter-friendly "offers" from a whole slew of bookmakers, Bet365 consistently stands out from the crowd with their genuinely valuable and worthwhile offers.
Am I spamming Bet365? Of course not -- you don't see any banners, buttons or links to their site on here, do you?
And I hyping them as a bookmaker? Yes, in this particular instance I am indeed -- simply because of the advantages to us as punters that their offer provides.
For quite a while now Bet365 have run a promotion on Saturdays whereby they give a free bet on the following race if you manage to pick a 4/1 (or better) winner on a previous Channel4 televised race.
Big deal? You have to pick a 4/1 winner to get the free bet?
Yes, you do. But, if you realize the arbing opportunity this offer provides, then you will also realize that you DON'T have to pick the winner of a race to profit.
Bet365 also go "best price" of a basket of other bookmaking firms, which is a huge benefit to us in our no-risk arbing project. You should find in each race at least one horse which is at a similar Lay price on Betfair as it is "to Back" with Bet365. (Use Oddschecker as a quick comparison). In some cases the Lay odds on Betfair will be lower than the Back price with Bet365 due to Bet365's policy of best odds on the race. For instance, as I write, Abergavenny in the first qualifying race (Newmarket 2:05) is available at 6/1 with Bet365, and available to Lay on Betfair at 6.6 -- just a little over 11/2..
This will obviously allow you to Back with Bet365 and Lay with Betfair for a decent no-risk profit if the horse loses. E.G. Bet £50 at 6/1 with Bet365 and Lay £340 on Betfair to win £58 (after commission).
What if the horse wins? You lose £340 ? Yes, but you win £300 with Bet365 AND YOU HAVE A FREE £50 BET ON THE NEXT RACE which you can lay off on Betfair.
Horse wins or loses ............. you win.
Today there are seven such Channel4 televised races which qualify for the free bet.
In these times of regular punter-friendly "offers" from a whole slew of bookmakers, Bet365 consistently stands out from the crowd with their genuinely valuable and worthwhile offers.
Am I spamming Bet365? Of course not -- you don't see any banners, buttons or links to their site on here, do you?
And I hyping them as a bookmaker? Yes, in this particular instance I am indeed -- simply because of the advantages to us as punters that their offer provides.
For quite a while now Bet365 have run a promotion on Saturdays whereby they give a free bet on the following race if you manage to pick a 4/1 (or better) winner on a previous Channel4 televised race.
Big deal? You have to pick a 4/1 winner to get the free bet?
Yes, you do. But, if you realize the arbing opportunity this offer provides, then you will also realize that you DON'T have to pick the winner of a race to profit.
Bet365 also go "best price" of a basket of other bookmaking firms, which is a huge benefit to us in our no-risk arbing project. You should find in each race at least one horse which is at a similar Lay price on Betfair as it is "to Back" with Bet365. (Use Oddschecker as a quick comparison). In some cases the Lay odds on Betfair will be lower than the Back price with Bet365 due to Bet365's policy of best odds on the race. For instance, as I write, Abergavenny in the first qualifying race (Newmarket 2:05) is available at 6/1 with Bet365, and available to Lay on Betfair at 6.6 -- just a little over 11/2..
This will obviously allow you to Back with Bet365 and Lay with Betfair for a decent no-risk profit if the horse loses. E.G. Bet £50 at 6/1 with Bet365 and Lay £340 on Betfair to win £58 (after commission).
What if the horse wins? You lose £340 ? Yes, but you win £300 with Bet365 AND YOU HAVE A FREE £50 BET ON THE NEXT RACE which you can lay off on Betfair.
Horse wins or loses ............. you win.
Today there are seven such Channel4 televised races which qualify for the free bet.
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